A Burning Issue for Foreign Policy
Event:UK Ambassador to the United States Sir David Manning
addresses the 2006 Frank E. and Arthur W. Payne Distinguished Lecture
Location: Stanford University
thanks to Professor Chip Blacker for his introduction.
let me begin by saying how grateful I am to him, and Stanford
University, for the invitation to give one of the Frank and Arthur Payne
Lectures. This is one of the best universities in America, and
therefore in the world; and it is a great privilege to be given this
platform. And let me also say a particular word of thanks to my old
friend, Ambassador Dick Morningstar, for all his help with my visit to
should like to be clear, by way of introduction, that my remarks today
are personal, and do not necessarily reflect the views of the British
government I want the freedom to range over my subject - the impact of
energy on foreign policy - that only a personal perspective can give. I
shall not claim, in the best traditions of fiction, that all my
characters are entirely imaginary: but I shall claim my interpretation
of them, and my reading of the plot, is mine and mine alone.
I was thinking about this lecture some months ago I was struck by a
critical, indeed strategic, energy decision that Winston Churchill had
to take on the eve of the First World War. It turns out that Daniel
Yergin has been thinking along similar lines because, somewhat to my
surprise, when I opened this month's copy of Foreign Affairs, it was to
discover that he begins his article "Ensuring Energy Security" with
exactly the same Churchillian example that I want to use. Perhaps this
is the law of coincidence; perhaps the law of relevance. At any rate, it
In 1911, Winston Churchill faced a difficult
decision. Recently appointed First Lord of the Admiralty, Churchill’s
task was to ensure that the Royal Navy, symbol of Britain’s imperial
power, was ready if there were a war with Germany. The question he faced
was whether to convert the Navy from coal, its traditional source of
fuel, to oil. The attraction of oil was clear: more efficient use of
manpower, less use of cargo space for the fuel, and greater speed. On
the other hand, why abandon reliance on safe, secure Welsh coal, in
favor of distant and insecure oil supplies from Persia? For Churchill,
the balance of risk was clear: he ordered that Britain should base its
naval supremacy on oil. Famously, he wrote: “Mastery itself was the
prize of the venture."
a century later, the challenge of energy is more than ever at the
forefront of foreign policy. In the first few months of this year most
of the issues at the top of the agenda have included energy. Relations
with Iran, Iraq, China, Venezuela and Russia have energy as a central
component. So does terrorism; so, by definition, does
counter-proliferation. The British government, the European Union, the
US Administration, and the multilateral institutions are all faced with
a common problem. How can the international community secure reliable,
affordable, sustainable and, perhaps above all, safe sources of energy?
We have to address this question in a
complicated and difficult international environment.
many months the West, and indeed the IAEA, has been grappling with the
question of how to monitor the ambitions of the world’s fourth largest
oil producer to become a nuclear power. Iran’s nuclear development
program - long clandestine and denied - is directly counter to the
international community’s determination to avoid the proliferation of
weapons-grade nuclear fuel.
UK’s agenda for the G8 group of countries last year focused on climate
change and development in Africa: both raise key questions about energy.
This year Russia has said that energy security will be the key theme of
its G8 Presidency. Given the Russians' approach to energy in their
dealings with Ukraine, Georgia and their European neighbors, this is
welcome and urgent.
New Year’s Day, Russia cut its gas supplies to Ukraine. After four
days, after warnings from the US Secretary of State, and a period of
uncertainty for European countries who depend on Russia for up to 40% of
their gas supplies, a deal was brokered. But the lesson was clear:
Russia is prepared to use its energy resources for political leverage.
weeks later a series of explosions on the Russia-Georgia border cut off
gas supplies to Tbilisi in the middle of one of the coldest winters on
record in the Transcaucasus.
to home, oil prices in the US soared from $24 a barrel in early 2003 to
a peak of $70 last September. As a result, President Bush made energy
independence a centerpiece of his State of the Union address. Saying
that America was “addicted to oil," he announced a goal for the US to
cut imports from the Middle East by 75%, by 2025.
scarcity of energy supplies and the energy imbalance between nations is
a threat to our prosperity and national security. As resources contract,
oil-hungry economies will compete for dwindling supplies of
hydrocarbons. Competition for fossil fuels will increase. As Sen. Dick
Lugar, chairman of the US Senate Foreign Relations Committee recently
said "Our critical international security goals, including countering
nuclear weapons proliferation, supporting new democracies, and promoting
sustainable development are at risk because of over-dependence on
I want to turn now to the factors that shape our energy security:
assess how these are re-defining foreign policy in the 21st Century; and
suggest what we might do.
Energy resources have long been a major
strategic concern: access to secure sources, control over supply lines:
these are issues of national security.
was in 1947, as the Cold War intensified, that the US Interior
Department first called for a new Manhattan project: a $10 billion
program that would be capable of producing 2 million barrels a day of
synthetic fuels. This was prompted by concern over the US’s potential
dependence on oil.
years ago the Suez crisis arose because the Suez Canal was the route by
which Gulf oil reached Europe. The canal cut the journey to the UK to
6,500 miles, almost half that of the journey around the Cape of Good
Hope. By 1955 two thirds of Europe’s oil flowed through the canal. Why,
argued Nasser, should the oil-producing countries receive 50% of the
profits from their oil, if Egypt did not receive 50% of the profits from
the canal? The canal was Europe’s jugular. Hence the warning that Prime
Minister Eden gave to the Soviet leaders Bulganin and Khrushchev during
their visit to London in the April of 1956. He said: “I must be
absolutely blunt about the oil” … “We could not live without oil and… we
have no intention of being strangled to death."
oil crises of the 1970s forced the West to recognize its dependence on
cheap oil; and the reality that those who controlled supply were in a
position to exert direct political pressure on the rest of the
international community. In the words of Henry Kissinger, the oil
weapon, wielded in the form of an embargo, “altered irrevocably the
world as it had grown up in the postwar period.” Dr Kissinger, by his
own admission, had before 1973 known little about oil. That would
rapidly change. In the US the shortfall struck at a fundamental belief
in the abundance of natural resources. In a matter of months American
motorists saw retail gasoline prices climb by 40% and had to sit in gas
was what prompted President Nixon to launch Project Independence in
1973, three decades after it had first been mooted under the Truman
Administration. In the spirit of the Apollo and Manhattan projects he
set out a series of measures for the US to meet its “own energy needs
without depending on any foreign energy source” by 1980. Seven years
later, in response to a second oil crisis, the 1980 Carter Doctrine
declared that “any attempt by an outside force to gain control of the
Gulf will be regarded as an assault on the vital interests of the United
States of America, and … will be repelled by any means necessary,
including military force.” There is more than an echo here of what
Anthony Eden was saying a quarter of a century earlier.
warnings about oil addiction and energy dependence have a long
pedigree. One might add that so does a reluctance to act on those
warnings, whether here in the US or more widely.
one further historical reminder: In 1990, in the first Gulf War, the
West faced the threat of a dictator who was prepared to seize Kuwait.
Had he held on to it, Saddam Hussein would have controlled 20% of OPEC
production and 20% of world oil reserves. He would have been in a
position to intimidate neighboring countries, to be the dominant power
in the Gulf.
have we learned from such episodes? In the short term to allow market
forces to allocate supplies, and to depend on the use of excess
production capacity and strategic reserves in case of disruption. In the
longer term to diversify the types of energy we use and to diversify
our sources of supply, as well as to seek efficiency gains that limit
the economic damages of price shocks. We have also learned, with
varying degrees of success, to develop flexible energy policies based
on market mechanisms. The goal has been to allow the market to operate,
to reduce the threat of disruption, and to mitigate the effects of a
disruption if it does occur.
this approach is no longer enough. The energy challenge is now more
pressing than ever. Despite the warnings down the decades, our
societies have become more, not less, vulnerable to the politics of
energy. Oil and gas prices are near record highs. The question we now
need to frame is not so much what do we do about energy security, but
Five Drivers of Energy Insecurity
There are at least five key factors that
drive the current energy crisis:
rapid population growth in rapidly industrializing countries is
fuelling rising energy demand. The International Energy Agency predicts
that energy demand will rise by up to 60% by 2030. Global consumption of
oil is 50% higher now than it was in 1985: and we have seen a 15%
increase since 2000. As one major oil company is fond of reminding us,
it took 125 years to consume the first trillion barrels of oil: it will
take 35 years to consume the second.
whole world is hooked on convenient, transportable, versatile, oil. A
fifth of the projected global increase will fuel the US, which by 2025
could use as much oil as Canada, Europe, Japan, Australia and New
Zealand combined are using today. A 20-mile round trip in an average car
to buy a gallon of milk burns a gallon of gasoline at about half the
milk’s cost. The extraordinary global oil industry has made US gasoline
abundant, cheaper than bottled water, and a half to a fourth cheaper
than gasoline in Europe or Japan.
the scale of future demand will be driven not so much by the US and
Western Europe, but by the major emerging economies. China and India
have 40% of the world’s population between them – as much as the
populations of the next twenty largest countries combined. Billions of
people living in developing countries whose economies are twice as oil
intensive as ours need to fuel their development. Just one-eighth of the
world’s people own cars; many more want one and will soon acquire one.
World Bank estimates car ownership in China is currently at only seven
vehicles per 1,000 people, compared to more than 480 per 1,000 in the
United States. By 2030 it is forecast to rise towards Western levels.
The pace of economic change is break-neck. China’s economy has averaged
9.5% growth rate over the last twenty years. In 2005, China used 26% of
the world’s crude steel, 37% of the cotton and 47% of the cement. By
2005 China had over 350 million mobile phone subscribers, up from just 7
million in 1996, and double the number in the United States.
revolution needs energy. India’s consumption of oil has doubled since
1992. China’s thirst for oil grew by more than 15% in 2004, has doubled
since 1994 and will double again between 2003 and 2010. That is why we
have seen China seeking oil partners across the globe, from Sudan to
Saudi Arabia. It was no surprise that King Abdullah of Saudi Arabia’s
first visit as monarch this January included a stop in China. Asia
and the Far East now account for over 50% of Saudi oil exports. It is
why we saw the Chinese bid in the summer of 2005 for US-owned Unocal.
Competing with these emerging giants for energy strains international
relations: global competition for energy sources threatens stability.
the supplies of oil on which we depend are finite. Global oil
production is apparently nearing its peak. Although there is intense
debate about exactly when this will happen - something Daniel Yergin
discusses in the Foreign Affairs article I referred to earlier - current
estimates seem to be converging on some point between 2010 and 2020.
Oil itself will never run out – as the saying goes, “the stone age did
not end because of a lack of stones." But the unavoidable fact is that
the economics of pumping it in future are uncertain. One of the most
intriguing things about this debate is that it is happening at all. It
is extraordinary that a century into the age of oil, with the global
economy dependent on $3 trillion worth of this black liquid each year,
we don’t even know how much is left.
International Energy Agency predicts that, if we do nothing, global oil
demand will reach 121 million barrels per day by 2030, up from 85
million barrels today. That will require increasing production by 37
million barrels per day over the next 25 years, of which 25 million
barrels per day has yet to be discovered. That is, we’ll have to find
four petroleum systems that are each the size of the North Sea.
this realistic? Production from existing fields is dropping at about 5%
per year. Only one barrel of oil is now being discovered for every four
consumed. Globally, the discovery rate of untapped oil peaked in the
late 1960s. Over the past decade, oil production has been falling in 33
of the world’s 48 largest oil producing countries, including six of the
11 members of OPEC. How then will we meet the soaring demand that the
growing global economy will require?
third driver of energy insecurity is the growing geographic
concentration of energy reserves. Oil and gas supplies are becoming more
concentrated and less secure. 80% of oil and gas trade is in three
regions: Russia, West Africa and the Gulf. By 2025, 25 million barrels
per day (one of three in production) will come from Saudi Arabia, Iran
and Iraq. Over 80% of global reserves are in the hands of governments
and national oil companies. We are seeing a convergence of geological
difficulty with geopolitical uncertainty.
top eight non-Gulf suppliers are: Angola, Azerbaijan, Colombia,
Kazhakstan, Mexico, Nigeria, Russia and Venezuela. The US depends more
than ever on the supplies from countries where there are political
uncertainties and who may not subscribe to Western values, and with whom
relations can be volatile. In some cases the West is paying large sums
for oil and gas to countries that are at best equivocal in tackling
terrorism, at worst supporting it.
result of this geographical concentration is that oil and gas flows
through a handful of vulnerable transit routes. These choke points may
become increasingly vulnerable to attack: the Straits of Hormuz and Bab
El-Mandab, the Straits of Malacca and the Bosphorus. Already, nearly 20%
of global oil supply flows through one narrow waterway: the Straits of
when it comes to concentration, the Gulf alone has approximately 65% of
declared global reserves. Saudi Arabia, the world’s sole “swing
producer” holds one-fourth of global reserves and in spring 2004
controlled 80-85% of spare output capacity. Al Qa’eda calls oil the
“umbilical cord and lifeline of the crusader community” and in April
2004 specifically incited attacks on key Gulf installations. Two
thirds of Saudi oil goes through one processing plant and two terminals;
a half of current Saudi capacity comes from one oilfield.
the last eighteen months have shown us that the spare capacity on which
we have previously relied is limited. Hurricanes Katrina and Rita
removed 1.4 million barrels of production a day from the international
markets, more than the total production from Libya or Angola. Today’s
high prices are a product of the fact that the oil markets are
vulnerable to disruptions by natural disaster or conflict. Individual
countries need not be directly affected by a supply shock in order to
feel the repercussions. A disruption in one part of the world quickly
impacts on world prices and supply. Because oil is traded globally, we
are all vulnerable.
our dependence on hydrocarbons is leading to rising carbon emissions
and their potentially devastating impact on the global environment.
There is no longer any serious scientific doubt that climate change is
occurring. Last year, Prime Minister Tony Blair made climate change one
of his two key priorities for the UK Presidency of the G8. Just before
the Gleneagles summit, the National Academies of Science of all G8
countries, along with those of India, China and Brazil published a
statement which said: “most of the warming in recent decades can be
attributed to human activity”…“the scientific understanding of climate
change is now sufficiently clear to justify nations taking prompt action
... a lack of full scientific uncertainty about some aspects of climate
change is not a reason for delaying an immediate response."
in the UK, and most of the global scientific community, are convinced
that the global economy’s use of hydrocarbons is the primary driver of
this abrupt temperature shift and associated sea level rise. Last month
US researchers presented evidence that the Greenland ice cap has doubled
its melting rate in the last five years. It is now estimated to be
losing 220 cubic kilometers of water a year – in comparison the city of
Los Angeles uses about one cubic kilometer of water a year. If it melts
completely, global sea levels will rise by around seven meters.
is plenty more that we need to know about climate science. But we can
say with certainty that there have not been the current levels of carbon
dioxide in the atmosphere for 400,000 years, possibly for 4 million
years. That puts the history of our species into perspective. The 10
warmest years on record have been since 1991, the five warmest since
1997, and the single warmest was last year.
Re, the world’s second largest re-insurer, has forecast that the
insurance costs from rising sea levels, more severe droughts and other
results of climate change will total $265 billion a year by 2010, four
years from now. Climate Change will also lead to a higher risk of
conflict over scarce resources, and of natural disasters. And it will
hit the poorest hardest, especially those in low lying areas or those
affected by the northward spread of diseases such as malaria. A global
temperature rise of one degree Celsius will equal a rise of up to four
degrees in Africa. Changes of this magnitude will exacerbate global
problems such as drought, famine, disease, regional insecurity, and
population displacements, and seriously impede poor countries’ efforts
to tackle poverty and develop sustainably. Changes of this magnitude
will cause huge upheavals and bring with them huge foreign policy
then are five factors which are changing the energy landscape: rising
demand; dwindling supply; greater concentration of resource in the hands
of a few; limited spare capacity; and the environmental impacts of
A word now on the consequences of energy
resource wealth for the "lucky" producer countries, and I put the word
lucky in quotation marks; and the impact this has on the wider
corruption, that driver of instability. It can take many forms, but the
most extreme is the looting of State assets by elites. Many of the most
corrupt countries earn the bulk of their export revenues from resources
that include oil and gas, diamonds, minerals and timber. In Angola, an
IMF audit has been unable to account for hundreds of millions of dollars
in oil revenue that went missing under previous governments. Corruption
is theft from national exchequers. Dollars spent on fast cars or
stashed in foreign bank accounts is money not spent on schools,
healthcare, accountable security forces or other essential public
services. Nigeria, which has also had to struggle with corruption, has
received more than $300 billion in oil revenues in the past 25 years but
its per capita income remains below $1 a day.
wealth also helps prop up weak regimes. It insulates them from internal
and international pressure. They calculate that the international
community is likely to lower its voice and pull its punches because of
its energy dependence. The addict needs the pusher. These regimes lack
the motivation to make the reforms to their economies that are essential
for sustainable economic growth. The sad fact is, too, that many of the
countries that are resource rich are the least likely to build the
accountable and transparent government structures they need if they are
to develop into open and democratic societies.
on energy exports distorts political and economic institutions,
centralizes wealth, and makes leaders resistant to change while at the
same time providing them with sufficient resources to stave off
necessary reforms. Reliance on resource wealth reduces the imperative to
engage with citizens and to promote a healthy civil society. Only 9% of
world oil reserves are held by countries considered free by Freedom
resources can also be a source of internal instability and conflict.
Mineral wealth often fuels internal grievances that cause conflict and
civil war. Secrecy about oil payments leads to public resentments. In
recent years, armed gangs have roamed the Niger delta, looking for
opportunities to extort oil wealth. As the recent kidnappings of oil
workers have shown, their demands have become increasingly political.
factors are well documented. Countries that are highly dependent on
revenues from oil and gas, timber and minerals score lower on the UN
Human Development Index, have a greater probability of conflict and have
larger shares of their population in poverty. The "lucky" countries
that are resource rich in fact turn out to suffer from the "natural
is an Angolan proverb that says "If God loved Angola, He would turn all
the diamonds into rocks and all the oil into seawater."
not just the stunting and distorting impact on political development -
the resource curse often brings about economic instability. The rush of
foreign earnings drives up the value of the currency. This in turn makes
domestically produced goods less competitive at home and abroad. Over
time, domestic manufacturing and agriculture decline; then growth
income generated by resource exports is often squandered, too, on
extravagant military programs, which in turn create internal
instability. In the decade from 1984 to 1994 OPEC members’ share of
annual military expenditure as a share of total government expenditure
was three times as much as developed countries.
“natural resource curse” can also lead to regional instability.
Sometimes this takes the form of simple rivalry for resources of the
sort you see in the Caspian basin. Sometimes, energy-rich countries seek
to buy regional influence: look at Latin America. And mineral wealth
can be used just as easily to put pressure on neighbors and intimidate
them - particularly other developing countries that are resource poor -
as it can to seduce them and buy their support.
resources then have a very direct bearing on international stability.
Badly used, they foster corruption, internal dissent, economic imbalance
and bad government, with clear and destructive consequences for the
wider international community.
Foreign Policy Consequences
For consumer countries, there is a tension
between our need to secure energy supplies and our other foreign policy
is OPEC’s second largest oil exporter and holds 35% of global gas
reserves. Experts predict that interruptions in the flow of Iranian
crude to world markets could send prices over $100 a barrel. It does not
take a PhD in International Relations to work out that the response of
some countries to Iran’s nuclear ambitions has been colored by Iran’s
role in the global energy market.
take an historical case. In the 1970s, the dominance of Soviet gas
supplies to Europe was cause for concern. The first Soviet exports to
Poland began in the mid-1940s, but remained small scale. Then, in 1970,
a 20-year contract was signed with West Germany, and plans followed for
a pipeline across Germany to supply France with Soviet gas. In the
context of the Arab embargo, the Soviet Union positioned itself as a
more reliable source of energy than the Middle East. The advent of North
Sea gas lessened the UK’s dependence on Soviet gas, but today we in
Britain have to return to the issues of security and diversity as we
again become a net importer of gas. And like the rest of our European
partners, we took note of what happened to Ukraine on January 1.
will be affected by developments in Russia whether directly, through a
link into Russia’s pipeline network, or indirectly, given the
increasingly integrated European market. Russia has the world’s
largest natural gas resources, controlled in large part through one
state-owned company, Gazprom. In the past, Gazprom has scrupulously
maintained security of supply to its Western European customers. It
never turned off the taps to its West European clients, even in the
depths of the Cold War. But the expansion of Western European demand
obviously offers Gazprom increasing revenue and influence.
the light of the Ukraine episode we are bound to ask ourselves about
the reliability of our energy supplies. Where is the balance between
supply and demand? How far is this a mutual dependence that transcends
political ups and downs? How much of a risk is it sensible to
will involve diversification; a more liberalized EU energy market,
closer relations with other Central Asian gas suppliers, strong
international commitments as well as more investment in the Russian
energy sector. In the meantime, we have to face the fact that the EU
will depend for at least a decade on a Russia that demonstrated in early
January that it is prepared to turn off the taps.
instability also has an economic impact on consumer countries. We now
face the prospect of sustained high oil prices. Some analysts are
forecasting spikes to $100 oil this year. Over the last 30 years, oil
market disruptions are estimated to have cost the US economy seven
trillion dollars. Eight of ten postwar US recessions closely followed an
oil-price spike, and according to Alan Greenspan “all economic
downturns in the United States since 1973… have been preceded by sharp
increases in the price of oil." For example, the 1973 disruption
of one-eighth of US supply doubled unemployment and slashed 1975 GDP by
up to 5.5%.
Ways to Move Towards Energy Interdependence
The energy challenges that we face are
daunting, urgent, but not insurmountable. But we need to look at the
problems in the round, and in the medium and long term, rather than
focus on the latest crisis. Above all we need to take a strategic view.
want to conclude with two proposals.
first concerns technology. Whether you are concerned about the impact
of carbon dioxide on the stability of our atmosphere, or about reducing
your dependence on foreign oil, it is clear that the solution is
technology. How do we transform the technologies on which our societies
are based? How do we leverage the scientific breakthroughs, the
expertise in research and development, and allow the flows of finance to
bring these technologies to market? What market mechanisms can be used
to stimulate the investment required? What is the role of government
relative to that of the private sector?
is much easier to list the questions than the answers. Some government
intervention is necessary: voluntary activity by business alone will not
be enough. We have to put the right incentives in place for the private
sector to invest heavily in clean technology. In the UK we are
trying to do that through a range of policies, including a form of
carbon tax, and a national cap-and-trade scheme for carbon dioxide
emissions. As a result our greenhouse gas emissions are over 14% lower
today than they were in 1990, during a period when our economy has grown
over 35%. We do not need to sacrifice economic prosperity to meet
energy and environmental goals.
year, at Gleneagles, the G8 launched an Action Plan which looked across
the range of international collaboration on technology, and asked what
else should be done. As Prime Minster Blair said at the time, we need to
launch a new, green industrial revolution in clean, low carbon energy
technologies. This G8 Dialogue, as it is now called, is due to have its
second annual Ministerial meeting in Mexico this year, and will report
back on progress to the G8 in 2008.
the level of investment required will not come from governments alone.
It will have to come from the private sector, acting commercially in a
market environment. The International Energy Agency predicts that $16
trillion of investment will be needed to meet the rise in energy demand
by 2030. That is $568 billion a year.
campus is the center of far reaching research on our energy future. For
the last 30 years the Energy Modeling Forum has been developing
analytical methods and models for energy planning and policy analysis.
Stanford's Global Climate and Energy Project, only three years old,
already has 28 research projects under way aimed to develop a portfolio
of technology options for a global energy system while reducing
greenhouse gas emissions.
one thing is sure: no one technology will alone provide the solution.
Each has a role to play: natural gas, wind and solar, clean coal,
hydrogen, cellulosic ethanol. We need a range of technologies that will
wean us off hydrocarbons and avoid irreversible damage to the
atmosphere. And we don't need to wait before developing these solutions.
A lot can be achieved through application of existing technologies.
for their part must be wary of picking technology winners. They have a
terrible record of doing so. But with that caveat, I want to highlight
two technologies to which we should pay more attention:
first is nuclear power. It remains politically controversial. The US
administration has stated its intent to see a new nuclear plant built in
the US – the first for over 30 years. In the UK we are currently
reviewing our energy policy. A key question is whether we need nuclear
power to meet our long term energy security and carbon reduction goals.
My personal view - and I stress that it is a personal view not a
government one - is that nuclear power has to be part of the solution.
I accept that there are serious problems to be addressed. Concerns
about safety and risk to the public; concerns about what to do with the
waste product; concerns about the massive cost of a new phase of
broadly, we need to consider how we can ensure safe, global access to
nuclear power, while managing the risks of proliferation. We have
grappled with this challenge since the start of the atomic era. Much of
the power generation needs of developing countries could be met by
nuclear power. It is a zero-carbon source of energy, as opposed to coal
to which many emerging economies are turning. We have the
technology. There are over 130 nuclear power reactors either under
construction, in the planning phase or under consideration around the
globe. In my view, we must accept that this is not a technology that is
in decline, and shift our focus to finding ways to ensure its safe and
are already collaborating internationally to consider some of these
issues. In February 2005 the UK signed up to membership of the
Generation IV International Forum, joining the US, France, Japan and six
other countries to develop the next generation of nuclear
month, the Bush Administration launched the Global Nuclear Energy
Partnership, requesting $250 million of funding to develop new
proliferation-resistant technologies with other nations possessing
advanced nuclear expertise. The partnership plans to develop Advanced
Burner Reactors to improve the recycling potential of used fuel, without
the separation of plutonium. They will then develop a fuel services
program for developing nations, and help those countries to build small
scale proliferation-resistant reactors that can burn down the spent
fuel. This will allow countries to access nuclear technology cost
effectively, in exchange for their commitment to forgo enrichment and
my view we should take this further. A single international body could
be set up to build, operate and supervise a new generation of light
water reactors in countries that are Non Proliferation Treaty
signatories. They would then be able to access nuclear technology cost
effectively; and without risk to the international non-proliferation
second technology is energy efficiency. This might seem
counter-intuitive. But we should think of efficiency as a technology in
its own right. It has massive potential to improve our environmental
performance and our energy security. Last Autumn, after the severe
impact of hurricanes Katrina and Rita on US energy infrastructure, the
Administration recognised this, and called for a massive improvement in
US energy efficiency. Energy saved is energy that does not need to be
produced. Efficiency is an important contributor to energy security.
still need a much more concerted effort to reduce demand. This is the
relatively easy bit. Energy efficiency measures can, in many cases, be
implemented at minimal cost. Fifty percent of the UK’s
aggressive targets to cut carbon emissions will come, by 2020, from
energy efficiency measures. In the US, the Department of Energy reports
that if every American homeowner replaced their five most used
lightbulbs with more efficient compact fluorescents, the nation would
save 800 billion kilowatt hours of electricity, the equivalent of
shutting down 21 power plants. Efficiency is also good for business. BP
implemented an internal trading program to cut their carbon emissions
10% over 10 years. Through targeting energy efficiencies, they met that
goal in two years, and made approximately $635 million in efficiency
such as BP or GE are arguing that they see real business opportunity in
developing the next generation of green technologies. They are investing
huge sums in research and development so they can lead the technology
revolution and dominate innovation. And surely here in the US, the home
of innovation, of scientific excellence, you have the skills, the
genius, not only to lead the green industrial and green energy
revolution, but to profit handsomely from it on a global scale. Rather
than see this as a threat, see it as a huge business opportunity.
need to make the argument so that our publics understand. The US uses
26% of the world’s oil, but has only 4% of the world's population. The
US fuel economy standard for cars has not changed since 1990. We have
the technology to do much better. The Energy Information Administration
calculates that if currently available auto efficiency technology were
implemented it would cut in half the projected US growth in gasoline
demand over the next 10 years. And let me raise the issue of tax if only
to point out that in the UK the equivalent of a US gallon of gasoline
costs $5.88, that is over twice the price here in the US.
America’s federal gasoline tax of 18.4 cents a gallon has not been
increased since 1993.
brings me to my second proposal for trying to deal with the energy
problem. And that is a transformation in the way we think about and
approach these issues. We need a more integrated and strategic approach.
often energy sits in its own institutional silo. We will not solve
these issues until we see that they are not energy issues alone. They
affect our environmental policy, our trade policy, our international
development policy. They lie at the heart of our economic policy. And –
as I have argued - they have a central impact on our national security
and foreign policy.
policy must be integrated better across governments and between
governments. In Europe we have made a start. At a meeting in Hampton
Court convened by Prime Minister Blair last October, EU leaders agreed a
framework for a common European Energy policy. This would diversify
sources of power, develop a genuinely open energy market, develop a
shared vision of European needs, focus on developing energy efficiency
and clean technologies, and develop a coherent approach to EU dialogue
with major suppliers. The underlying theme is that we need to work
towards a genuinely open and functioning internal market in electricity
private sector investment in new technologies is to be leveraged, it
will need to be in a well functioning global market. We need better
information transparency, both on energy demand and supply. We need to
improve the stability of regulatory frameworks. That will help market
participants evaluate opportunities from a commercial standpoint,
something that is fair to all.
the Russia-Ukraine episode teaches us anything it is that greater
transparency, stability and openness will help us achieve our energy
goals, not greater management of markets by governments.
help achieve this integration, I believe that Europe and the US need a
far more coherent transatlantic dialogue about energy. For too long we
have dealt with these issues in isolation. We need to recognize that
there is no such thing as energy independence. Instead we face the
inevitability of energy interdependence.
share the same challenges, and will need to work together to deliver
the solutions. In part this will require us to work with experts in the
private sector and the leading academic institutions such as Stanford.
But we will also need to consider whether we need stronger international
institutions to address our energy concerns.
already have, in the form of the International Energy Agency, a center
of expertise for energy consumers and a mechanism to co-ordinate
international stock releases. This operated very effectively in the
aftermath of the hurricanes last year. We have a mechanism for dialogue
between key producers and consumers through the International Energy
Forum. We are working through the Joint Oil Data Initiative to improve
the data on the oil markets. We have in the Extractive Industries
Transparency Initiative a partnership to promote transparency in
we still tend to consider these questions in isolation. We react to the
immediate challenges and crises without seeing the underlying trends,
without calculating the sum of the parts. A more integrated
transatlantic energy policy is well overdue: one that assesses the
strategic challenges and their political consequences.
have two immediate opportunities in the next six months to build such
an approach. The first is the G8 summit, given Russia’s choice of energy
as a key topic. Our goal should be a strong public commitment to energy
security and stability in the G8 Declaration. And I hope that Russia
will, in this context, fulfill its promise to sign up the Energy
Charter Treaty, aimed at integrating the energy sectors of the Former
Soviet Union and Eastern Europe with wider global markets.
second opportunity is this year’s EU-US summit, at which I hope energy
will be a main topic of discussion. We should use that summit to
establish a new EU-US Strategic Energy Forum to consider all aspects of
energy: diversification; the development of alternative energy sources;
and, above all, security of supply. This Forum, reporting regularly to
ministers, should share analyses, share expertise and provide leadership
on energy issues. Indeed, a successful EU/US energy forum could
invigorate and extend a wider EU/US relationship that is sometimes more
preoccupied with trade disputes than with forging transatlantic
cooperation on the major strategic issues that confront us. The forum
could also provide a focus for OPEC and other major suppliers as they
think about their relationships with consumer countries.
I end where I began: energy is central to
our foreign policy because it is central to national security. Wherever
we look, problems are energy driven. The imperative to collaborate may
now be as strong as that which forced us to build collective security
structures during the Cold War.
final thought. This is not a problem that can wait ten years. As these
problems become ever more pressing and serious, we need the machinery to
understand and react to them, to share knowledge and implement
we get these decisions right we open up the prospect of a new
technological revolution that will create opportunities and transform
our world in ways just as profound as the first industrial revolution.
If we get them wrong, we face the prospect of competition and conflict
over resources, and destabilizing – perhaps destroying - the environment
that we depend on.
the bumper sticker says: "Good planets are hard to find."